What is an easy description of the word "asset" and "liability"?

Question

I'm talking about houses, and from the book Rich Dad Poor Dad, it claims that the no.1 rule for being wealthy is to understand these two words and spend more on assets

Answer 1

assets are good stuff like house car money etc liabilities are what is bad like debts money owed people or things that pull you down like some people.

Answer 2

An asset brings in a positive cash flow.
a liability consumes cashflow.


Your house is an asset...but not your asset. It is the banks asset. Even after it is paid in full it is still not an asset...because you pay property taxes. You might feel it is an asset because you could borrow against the equity...but then you are making payments again.

It never becomes an asset until you sell it, and earn money from the sale

Answer 3

You have 3 types of Assets :
1.Regular Assets that you own House,Car,Boat,etc If you owe money on these assets the amount there worth minus the amount you owe is what is the total asset value of these items
2.Liquid Assets-These consist of money in your Checking,Savings,401k,Stocks Bonds,Life Insurance with a cash value, ETC all these are liquid because you have acess to them at anytime
3.Personal Property- These consist of Furniture Clothing jewlry etc that each have a value to them

Liabilities -
This is all the debts you have home vehicle credit cards etc

So to determine what your Net Worth is Take all your assets an estimate a value for each of them then substract them buy the total amount you owe in liabilities and this is your net worth

Answer 4

assets are the probable economic benefits obtained and controlled by you as a result of past transactions. The asset must provide future net cash inflows. You should be able to receive the benefits and restrict other person's or entity's access to the benefit .
liabilities are the probable future sacrifices of economic benefits arising from present obligations of you to transfer your assets or provide services in the future as a result of past transactions or events.
the house whether paid in full or not remains to be an asset. If you obtained your house through borrowing, you will have both- asset and liability.

Answer 5

An asset can be a liability when it depreciates (i.e. new sports car) - fun but expensive.

A Liability can be an asset if the interest rate on servicing the debt is less than you are making on the money you have. This is why the rich get richer and it takes money to make money.

Answer 6

What you have and what you owe. In the case of property, asset is a property that brings value to your networth. It either produces cash flow, or has equity or great prospects for future equity. A liability property would be one that is costing you to keep. Low rents, high taxes or you paid too much for it and it's value is less than what you paid. So, What makes you money and what costs you money.

Answer 7

an asset is something that puts more money in your pocket than it takes out in a month.

a liability is something that takes out more money in a month than it puts in.

using this definition your home that you live in is a liability and not an asset. while it is true that most homes appreciate, you cannot take advantage of that value without slaughtering the asset. A rental home that takes in more money in a month than you have to put out to keep it up is an asset. you can use that value without slaughering the asset.

Answer 8

In legal and accounting terms, assets are things of value that have future economic benefits. They may be tangible and intangible. Tangible assets include buildings, equipment, land, natural resources like timber, cattle, and gold. Intangible assets include patents, copyright, trade marks, trade names, leaseholds, and financial assets such as accounts and notes receivable, and bond and stock investments. From a personal point of view, you may also consider assets to be your education, skill, knowledge, good looks, and intelligence. These are typically not measured or considered as assets in business.

Liabilities are obligations you have toward others. They include obligations to pay money in the future, often with interest. They may also include obligations to deliver goods or perform services in the future. Liabilities include accounts and notes payable, and long term and short term debts, such as bonds payable and mortgages payable. Liabilities are typically measured in terms of money. For example, obligations to be honest and polite are not considered liabilities. They are classified as virtues.

Answer 9

Assets are things that represent cash, if you can liquidate them [ property, stocks, deposits at bank etc. ].
Liabilities are debts therefore you have to pay the cash to liquidate them which makes them a liability!

Answer 10

Asset=something of value you have or something in good working order
liability=something you owe to someone else or something that needs to be fixed